Plan was a MEP, but no one knew it...

[Belgarath]

Interesting situation. An ERISA 403(b) plan - large plan, audited - was treated as a controlled group/affiliated services group for several years, when in fact, it was not - it was a MEP. 5500 forms did NOT have the MEP attachment.

If amended forms are filed with the MEP attachment, would that require a new audit? It seems unreasonable, as nothing changes except the attachment detailing the breakdown of the assets between the participating employers - total assets, participant counts, etc., remain the same.

Anyone ever encountered this?

[Peter Gulia]

Before turning to questions about how to report on a multiple-employer plan, the plan’s administrator might want its lawyer’s confidential advice about whether the plan’s participating charitable organizations are more than one employer or might be one employer for one or more relevant purposes.

For charities, no one owns shares of stock, other capital interests, or profits interests. Instead, the Treasury department’s interpretation of Internal Revenue Code § 414(c) looks to powers to elect, appoint, or remove a charity’s director, trustee, or member, including powers to do so indirectly, as a way to look for common control. 26 C.F.R. § 1.414(c)-5(b).

Further, “exempt organizations that maintain a plan . . . that covers one or more employees from each organization may treat themselves as under common control for purposes of section 414(c) (and, thus, as a single employer for all purposes for which section 414(c) applies) if each of the organizations regularly coordinates their day-to-day exempt activities.” 26 C.F.R. § 1.414(c)-5(c)(1) https://www.ecfr.gov/current/title-26/part-1/section-1.414(c)-5#p-1.414(c)-5(c)(1).

While the law about what is or isn’t one employer varies with each of several ERISA title I, Internal Revenue Code, and securities laws’ purposes, the Treasury department’s rule to interpret and implement Internal Revenue Code might be a useful support.

That the retirement plan’s administrator assumed for several years that the distinct charitable organizations comprise one employer perhaps suggests some practical grounds under which they might have been, and might be, one employer.

This is not advice to anyone.

[Belgarath]

Hi Peter, thanks for the suggestion, but that aspect has unfortunately already been investigated, and rejected. I probably should have mentioned that in the original post, sorry.

[Paul I]

The instructions to the Form 5500 include this note:

Note. An amended filing must be submitted as a complete replacement of the previously submitted filing. You will need to resubmit the entire form, with all required schedules and attachments, through EFAST2. You cannot submit just the parts of the filing that are being amended.

The reason EFAST2 takes this approach is when a form is amended, the existing filing is removed from the system and the amended is added into the system.

In the described situation, an amended filing will need to include the audit report for the year being amended.  It seems that the auditors need to answer the question whether anything changes in the audit report, if any new audit steps need to be taken in this situation, and if nothing changes in the audit report, that the auditor stands by the original audit report as valid.

My bet is the audit report will need to be reissued.  Hopefully the audit firm will rely on its previous and only charge a fee for work impacted by the change to a MEP filing.

 

[Belgarath]

Thanks!

[Peter Gulia]

What Paul I says.

And, if the plan or its administrator is or was advised by a lawyer, consider that the independent qualified public accountant might want, in addition to the administrator’s management-representations letter, the lawyer’s letter to confirm that she has not “given substantive attention” to the plan’s contingent liability (or contingent gain) beyond those management disclosed.

[Belgarath]

Thanks again.